MTN seeks to sell stake in Africa’s eCommerce giant Jumia Technologies

SOUTH AFRICA – MTN Group Limited, South African multinational mobile telecommunications company is planning to offload part or all of its US$243m interest in Jumia Technologies AG, Africa’s largest online retailer.

Called Africa’s Amazon, Jumia operates in 14 African countries including Nigeria and Ivory Coast where the US giant still lacks distribution infrastructure.

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This is part of the telco’s effort to reduce debt and drive future growth by disposing non-core assets

According to Bloomberg News, MTN would be taking advantage of the fact that Jumia’s shares have gained about 142% so far in 2020, recovering from its record lows in 2019.

The company headquartered in Germany and run by its two French founders, Sacha Poignonnec and Jeremy Hodara had dropped below its initial public offering price in 2019 after improper transactions in its Nigeria business were uncovered.

However private sources told Bloomberg that no decision about the sale has been reached yet.

The Africa focused eCommerce company, saw its losses narrow slightly even as revenue dropped by 7% in the first quarter of 2020, as the impact of the coronavirus pandemic varied by product category and country. 

The eCommerce giant posted revenue of US$31.79 million for Q1 2020 from 6.4 million eCommerce orders. This was a 6% decline from the US$34.1 million it recorded in Q1 2019. 

Jumia recorded a notable decrease in its operating losses. In the first quarter of 2020, its operating losses dropped for the first time in six quarters. Its losses stood at US$47.4 million in Q1, which is lower than losses from both the previous quarter (US$69.2 million) and Q1 2019 (US$49.4 million). 

Meanwhile, Jumia’s gross merchandise value (GMV), an important growth indicator for ecommerce companies, took a hit. The GMV is the gross value of all items sold on the platform. In Q1 2020, Jumia’s GMV stood at US$205.92 million, an 11.4% drop from March 2019. 

On the one hand, the drop was expected. In the second half of 2019, Jumia announced a portfolio optimization strategy. It said it will reduce the promotional intensity and consumer incentives for products like electronics and mobile phones, which has been one of the highest-grossing categories. 

The effect of the optimization was felt immediately by the end of 2019. Mobile phone and electronic sales crashed 20% compared to the previous year. 

By Q1 2020, the contraction expanded, aided by the COVID-19 pandemic. Mobile phone sales contracted by more than 40% as Jumia merchants struggled to restock due to global lockdowns and disruptions in supply chains. Electronics sales also witnessed a slump; it was down more than 10% compared to sales in Q1 2019. 

However, low- value everyday products are the fast-growing products across the Jumia platform. On JumiaPay, airtime recharge and payments for utility bills are the fastest-growing GMV activities, their growth rate was over 80% in Q1 2020. Fast Moving Consumer Goods (FMCGs), beauty and food deliveries grew more than 20% in the first three months of 2020. 

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